Operations and Logistics

Prior to the industrial revolution, most goods were produced and distributed locally. Shipping goods overseas was expensive and therefore limited to weapons, spices, and other high-cost items. The industrial revolution brought technological inventions that sped up production and allowed for the distribution of materials and goods to more people in wider locations.

Inventions that laid the foundation for more efficient work processes included the cotton gin and the spinning jenny. Eli Whitney invented the cotton gin, a machine that sped up the process of pulling out seeds from cotton fibers. James Hargreaves invented the spinning jenny, which was a machine that sped up the production of yarn. The spinning jenny had eight spindles that spun thread, which enabled one worker to spin eight spools of yarn at once. The mass production of cotton, yarn, and other goods, as well as parts for machinery, coupled with transportation developments such as steamships, railroads, and airplanes led to the creation of a global supply chain.

Logistics is a term that originated in military operations in the 1900s. It was determined that the key to successful military campaigns was supplying the correct number of men, machinery, and ordnance to the correct place and at the correct time. In the 1940s and 1950s, businesses started paying attention to logistics in business operations, in an effort to improve material handling and warehousing. The study of operations and logistics also gained ground due to the complexity of the military logistics of World War II.

The development of what was termed “physical distribution” in the 1960s added to the complexity of the operations and logistics field. Time-sensitive freight started to be transported by trucks rather than by trains. This created the need to coordinate warehousing, material handling, and freight transportation. The National Council of Physical Distribution Management was established to focus on this new aspect of industry. Starting in the 1970s, computers were used for transactions, record keeping, inventory, truck routing, and other aspects of operations and logistics planning. As the personal computer developed, business managers were able to use spreadsheets and map-based interfaces for operations and logistics planning.

By the 1980s, businesses realized that logistics management was an important key to efficient operations and revenue growth. The National Council of Physical Distribution Management changed its name to the Council of Logistics Management to reflect the growing attention to this discipline. Companies expanded their budgets to include training programs for logistics management professionals and to add new technology for logistics and operations planning. Software was introduced in the 1980s and 1990s for logistics planning, including material requirements planning, enterprise resource planning, and advanced planning and scheduling systems.

Manufacturing grew globally in the 1990s, particularly due to the increase in manufacturing in China. As a result, U.S. imports from China increased dramatically, from $45 billion per year in 1995, to more than $280 billion in 2006. This growth also triggered further need for operations and logistics planners to manage the complexities involved in conducting international business. Trained and experienced professionals were needed to coordinate operations and logistics with various entities in multiple countries.

This is also when the terms “supply chain” and “supply chain management” started to be associated with complex logistics strategizing. The Council of Logistics Management recognized this trend and changed its name in 2005 to the Council of Supply Chain Management Professionals. They explained the distinction between logistics and supply chain management as follows: “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements. … Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across business within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”

MOVED FROM OUTLOOK AND UPDATED: The coronavirus pandemic, which started in Wuhan, China, in late 2019, caused major disruptions early on to the operations and logistics industry. The disruption started in manufacturing in China, which then impacted supply chains around the world. A combination of factors contributed to this: backlogs of cargo at major container ports, travel restrictions that led to shortages of truck drivers, and cancellations of ocean carriers that would have transported the containers. The operations and logistics for various major industries were affected by this, including medical equipment and supplies, pharmaceuticals, automotive, electronics, and consumer goods. Lockdowns and border closures impeded the movement of goods, and freight bottlenecks occurred due to pandemic protocols such as social distancing requirements at warehouses. The rollout of the COVID-19 vaccine in 2021 boosted the economy and loosened pandemic-induced restrictions. The pandemic highlighted the drawbacks of having complex and extended value chains. Moving forward, the International Finance Corporation says that many supply chains "may shorten or diversity through reliance on alternative partners (for example, nearshoring) or intensified efforts to bring home (such as reshoring) strategic value chains." Other trends in the future may be adding additional warehousing capacity or dry ports near demand centers, which would reduce the time needed to deliver goods.

Technology is increasingly being used in the operations and logistics sector to increase efficiency and revenue and obtain insights that improve the operational success of businesses and other organizations. For example, operations and logistics professionals are using advanced artificial intelligence to plan delivery routes that save time and fuel, predict inventory demand, anticipate adverse weather events, and meet other goals. Companies are also utilizing semiautonomous and autonomous vehicles to reduce fuel costs and transit times, as well as to reduce or eliminate the cost of hiring and training human drivers.